Oracle Shareholders Score Victory in Battle Over NetSuite Acquisition

(CN) – A Delaware judge ruled that a majority of Oracle’s board is not independent enough of CEO Larry Ellison to make an unbiased decision whether or not to sue Ellison for allegedly pushing Oracle to overpay for cloud computing firm NetSuite, which Ellison substantially owned.

Last year, Oracle announced it would buy NetSuite in a deal valued at $9.3 billion.

Oracle CEO Larry Ellison was a major investor in NetSuite and owned about 40 percent of its stock at the time of the acquisition.

Although Ellison did not vote on the deal, a shareholder derivative suit filed in Delaware claimed that Oracle overpaid for NetSuite because Ellison’s allies orchestrated an agreement to pay NetSuite a 19 percent premium, paying out billions to Ellison in the process.

Vice Chancellor Sam Glasscock found that shareholders did not need to make a demand on the board because a majority of the board is incapable of deciding whether or not to sue Ellison in the interest of Oracle.

“Examining each allegedly non-independent director on the particular facts pertinent to her, as I must, I conclude there is reasonable doubt that a majority of the board that would have considered a demand would be capable of bringing its business judgment to bear,” Glasscock said.

The ties between the directors and Ellison go beyond just social or tangential business relationships, according to the 66-page decision, and plaintiffs successfully cast doubts on the independence of three outside directors.

Considered together with Ellison himself and the three insider directors, “a majority of Oracle’s twelve-person board could not impartially consider a demand.  Thus, demand is excused,” Glasscock said.

 

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